European shares drop on Spain downgrade

2011-03-10 14:12

London - Europe's leading stock markets retreated Thursday as eurozone debt fears sparked by a credit downgrade to Spain overshadowed news of positive company earnings, traders said.

London's FTSE 100 index of top shares slid 1.01% to 5 937.17 points in late morning trade as dealers awaited the Bank of England's latest decision on British interest rates due at 1200 GMT.

Frankfurt's DAX 30 fell 0.83% to 7 073.09 points and the Paris CAC 40 shed 0.68% to 3 966.60.

The Stoxx 50 index of leading eurozone companies lost 0.87% to 2 909.48 points.

"Markets are taking another pasting ... mainly on the back of Spain getting downgraded by Moody's," said Spreadex trader Chris Purdy.

"Market focus has now swung from panic over high oil prices derailing the world economy ... to European debt. It is quiet bizarre how the market chooses to ignore these debt problems and then become spooked when they resurface.

"They have not gone away and if anything will become worse, as we are seeing," Purdy added.

Moody's sliced Spain's credit rating Thursday and warned it may do so again, as it raised the alarm over Spanish banking woes and spendthrift regions.

New York-based Moody's cut the long-term debt rating by a notch to "Aa2" with a negative outlook, a serious setback to Spain's efforts to quell fears it may need an international financial rescue.

The downgrade came on the eve of a eurozone summit in Brussels to discuss bolstering the euro's defences against speculation that weak economies such as Portugal may follow Ireland and Greece into crises.

The Madrid stock market's IBEX-35 index was meanwhile down 1.30% at 10 423.4 points in midday trade.

In company news, the world's leading luxury carmaker BMW reported record profits and sales for 2010 on Thursday and said it expected more of the same this year.

The group, which also owns the Mini and Rolls-Royce car brands, said net profit soared to €3.23bn ($4.45bn) from €210m in 2009.

BMW's share price rose 0.60% to 58.49 euros in Frankfurt.

Elsewhere, British investment manager Schroders jumped 1.11% to 1 820 pence after its net profits more than tripled to £307.9m ($497m) in 2010 as the global economy recovered.

Schroders said it expected the "economic recovery to continue in 2011 which should support asset prices over the year."